Suze Orman Says 'Today's High Mortgage Rates Are An Important Lesson'

Financial adviser and author Suze Orman highlighted the significance of the recent surge in mortgage rates, emphasizing its role in teaching valuable lessons for financial security.

Her blog stressed the importance of prioritizing current circumstances over future expectations, regardless of homeownership status or mortgage involvement. She noted that mortgage rates remained unusually low for more than 15 years. After the 2008 financial crisis, they fluctuated between 3.5% and 4%. This led many people to believe that low rates were the norm and that they could get favorable mortgage terms for future home purchases or sales.

But last fall, the interest rate on a 30-year fixed-rate mortgage skyrocketed to nearly 8%, significantly increasing the cost of homeownership for potential buyers.

Don't Miss:

• Only 0.2% of single-family rentals make this platform's rigorous cut. You can co-invest in them with Jeff Bezos and other notable investors for only $100.
• Want to Create a Passive Income Stream? These High-Yield Real Estate Notes Might Be Your Holy Grail 

While mortgage rates could come down, it's also possible that they won't. Mortgage rates are tied to the federal funds rate set by the Federal Reserve, which announced last week that it will hold interest rates steady at 5.25% to 5.5%.

"In recent months, inflation has shown a lack of further progress toward our 2% objective," Federal Reserve Chairman Jerome Powell said. "It is likely that gaining greater confidence will take longer than previously expected." 

Powel indicated it's unlikely the next Fed's next policy move will be a rate hike. Still, Orman noted that the central bank has been unpredictable, so even if the fed rate falls, there's no guarantee they will drop enough to see the interest on a 30-year mortgage at 4% or lower.

"None of us know how the economy will shake out in the coming months and years," Orman wrote.

Trending:

• Elon Musk, Ken Griffin and Jeff Bezos are bullish on one city that could dethrone New York and become the new financial capital of the US. Investing in its booming real estate market has never been more accessible. 

Orman said fluctuating interest rates offer two valuable lessons.

First, when you have the opportunity to make an affordable and smart financial decision, it's best to do it rather than wait for a "better" deal.

Second, don't wait for mortgage rates to return to what they were.

"Just because mortgage rates were below 4% for more than a decade does not mean they will return to that level," she wrote. "I need to reiterate that rates got that low because, after the financial crisis, the Federal Reserve was so concerned about keeping the economy alive that it kept rates artificially low."

Orman's advice is not exclusive to mortgages. She said it's also not wise to wait for a stock or exchange-traded fund that has lost value to get back to the price you paid for it.

"When it comes to managing your financial life, my advice is to always focus on what you have, not what you had," she said. "Deal with today's reality, and I think you will build a more secure financial future."

Read Next:

• Commercial real estate has historically outperformed the stock market, but few investors have the capital or resources needed to invest in this asset class. This platform allows individuals to invest in commercial real estate with as little as $5,000. 
• This Bezos-backed startup selects America's prime single-family rentals and then lets you invest in them starting from $100.